Cable cord-cutters grow, but barriers still exist for most

The percentage of US households that have ditched their cable TV or satellite …

Americans who have cancelled their cable or satellite subscriptions still represent less than three percent of the people who watch TV shows online, but the group is growing, and fast. A report (PDF) from the Convergence Consulting Group said that nearly 800,000 households in the US had ditched their TV subscriptions in favor of over-the-air and Internet options as of the end of 2009, and that number was expected to double by 2011. Still, this is just a fraction of the overall market, and there are some major barriers preventing most viewers from cutting the cord.

Convergence Consulting Group said that cord-cutters currently represent less than three percent of people who watch full TV shows online—that's because the majority of Americans use online video to supplement their TV viewing habits, not replace them. This is good news for the networks and advertisers, as ad revenue on traditional broadcasts is still many orders of magnitude higher than what can be scraped together online. This much is evidenced by some of Hulu's troubles in keeping popular shows on its site and its ad bucket full.

Still, the number of US households going without satellite or cable is expected to reach 1.6 million by the end of 2011. These people are looking to iTunes, Netflix, over-the-air broadcasts, and other streaming options to take care of their needs—they're looking to DVD and Blu-ray less thanks to "tough economic times" and because Netflix, Redbox, and online options offer a lower value proposition.

Indeed, there are many Ars readers (and a few staffers) who have ditched their TV subscriptions. As for my household, we subsist on an (admittedly more complex than we would like) combination of Netflix streaming to an HTPC connected to the TV or to the iPad/computers, shows and movies purchased via iTunes and played on the TV/iPad/computers, and over-the-air broadcasts that are sometimes DVRed. This is our fourth year going without cable, and we couldn't be happier—except in a few select circumstances.

What are the remaining barriers?

We see two major barriers before most of the TV-watching public will start switching from their cable or satellite subscriptions to the Internet. Live sports broadcasts are one—sure, there are a handful that are broadcast via traditional methods (the Super Bowl being one of them), but there's a reason why so many sports fans have satellite dishes outside their homes. Some of those streams can be found surreptitiously online (routed through Romania, then again through Italy, then again through Russia, and then to the US), but they're not reliable enough to replace the real deal for dedicated sports fans.

The second major issue is the serious lack of availability of popular cable channel shows. There are some notable exceptions—AMC's Mad Men has always been available for purchase on iTunes the day after airing, making it easy to (legally) follow the show during the season without an AMC subscription. However, there are numerous others, such as Weeds and Dexter (two favorites at the Ars Orbiting HQ), that aren't legally available online until well after the DVD release for the season, which itself comes months after the season ends. For example, the latest Dexter season ended in December of 2009 and isn't expected to hit DVD release until August of 2010. Fans aren't generally willing to wait that long to watch their favorite show, and many will keep their TV subscriptions around for just that reason.

That, of course, is the whole reason why content producers delay their DVD and online releases—they want to make as much money as possible from the traditional broadcast before they defer to lower-level revenue generators. And because content creators can do that, they will continue to do so forever—or until the online-only market becomes so large that it will be impossible to ignore. 1.6 million households in 2011 is pretty large, but it's not enough to tip the scale just yet.

Jacqui Cheng
Jacqui is an Editor at Large at Ars Technica, where she has spent the last eight years writing about Apple culture, gadgets, social networking, privacy, and more. Emailjacqui@arstechnica.com//Twitter@eJacqui